20 July 2010 | Angeline Albert

Opinion is divided over whether the UK government is risking permanent damage to supplier relations with its contract spending cuts, the SM100 poll reveals.

The UK government has begun to cut public spending, including axing the previous Labour government’s ID card scheme.

Although 51 per cent of the buyers surveyed in the SM100 poll say the government’s supplier relationships will not be permanently damaged, 41 per cent say it will and 8 per cent were undecided.

One senior buyer predicted that large companies would still be keen to take on public sector work but added that the contract cancellations might be a disincentive for smaller suppliers.

However, one category manager said service could suffer if prices were pushed down too far. “Suppliers are not shy of removing or reallocating people from a contract that is not profitable to one that is.”

Paul Murphy from the National Policing Improvement Agency said: “Some suppliers may go bust or amalgamate as a result, so the market will be different and potentially less competitive.”